Axis Bank top Sensex loser over SUUTI stalemate; other bank shares also fall

People use a staircase next to a corporate branch office of Axis Bank in New Delhi July 18, 2013.Reuters File

Axis Bank shares fell as much as 6 percent on Friday after media reports emerged that the Centre won't be offloading its stake in the private sector lender held via the special purpose vehicle, Specified Undertaking of the Unit Trust of India (SUUTI).

The Axis Bank plunged to the day's low of Rs 556 before recovering to close at Rs 557.40, down 5.84 percent. The impact was also felt on the sectoral index, with the BSE Bankex falling 1.23 percent, sharper than the BSE Sensex that declined 0.36 percent to 28,668.

The Central government holds 11.53 percent in Axis Bank, apart from 11.17 percent in cigarette company ITC and 8.16 percent in engineering and construction firm in Larsen & Toubro.

The decision to sell the residual stake was postponed apparently after an RSS affiliate wrote a letter to Prime Minister Narendra Modi, raising objection to the proposal, saying it will send wrong signals to investors

"If carried forward, this decision will have far reaching consequences that go beyond normal disinvestment criterion. Recognising the strengths of ITC and L&T, certain vested interests are constantly trying to destabilise and inducing disinvestment in these national champions enabling BAT (British American Tobacco) and other foreign entities to take control of these companies," Swadeshi Jagran Manch (SJM), national co-convener Ashwani Mahajan told PTI.

"Humbly we wish to state that at present there is an atmosphere of hope generated by your able leadership about future growth prospects in the economy. Such a decision to offload shares of premier companies would send wrong signals to the investors that government itself does seem to be confident of its growth story," Mahajan said in the letter, the agency added.

The fall in Axis Bank share price also triggered a decline in other bank shares. Canara Bank closed 1.75 percent lower at Rs 302.50 while State Bank of India edged 1.15 percent down to end at Rs 254.40.